You have been given the assignment to read Beer School: Bottling Success at The Brooklyn Brewery. Upon completion of reading this informative book dealing with this real life rags to riches entrepreneurial….
Which of the prices calculated above would the company as a whole most prefer?
Montevallo Manufacturing operates a division in Brazil that manufactures goods for $30 in variable costs per unit. All 20,000 units manufactured each year are transferred to the Chicago division, where they are packaged for an additional $10 per unit and sold on the market for $75 each. There is no market for the product when it is unpackaged. The fixed costs of the Brazil division are $200,000 per year, and the fixed costs of the Chicago division are $250,000 per year. The tax rate in Brazil is 20%, while in Chicago the company pays 30% in taxes. Calculate the transfer price if it is based on a. Variable cost with a 10% markup b. Full cost with a 10% markup c. Which of the prices calculated above would the company as a whole most prefer? d. Given that there is no intermediate market for the transferred product, what difficultie